The Right Way To Calculate Marketing ROI

ROI is an acronym business loves to talk about. It’s one of the most important figures you have to take into account. Marketers often focus on superficial and short-term aspects of investments instead of something as crucial as ROI. People often talk about ROI in the context of fortune 500 companies, but that’s starting to change. With the knowledge of investment opportunities spreading, every business must know how to calculate and use their marketing ROI for successful ventures.

1. What is marketing ROI?

ROI, or Return On Investment, is exactly what it sounds like. It’s the amount of money you receive from a certain investment or venture. Different ventures have different ways of calculating ROI. Real estate has a pretty simple way to calculate how much ROI you get. Take the amount of money you spent on a property, add the amount of money you invested into it to increase its value. Once you sell the home, take out these two values from the profit of selling it and you have the return on investment for the whole process. Basically, you add up the total amount of initial investment and subtract it from the total profit.

“Online marketing works much the same way. The knowledge commerce business generates a certain amount of money, but it also costs a specific amount to actually market a product. It’s simple math when you get down to it. When it comes to your bottom line, disregard everything else, because this is the only thing that matters. If there is no return on your investment or the investment profit isn’t high enough to justify making any move, you might not opt for the investment at all.”

2. Getting to know marketing ROI in depth

While calculating ROI at its core is pretty simple, the real-world applications of it are much more complicated. Business isn’t just cut-and-dry math, it’s more akin to a game of chess. You make strategic moves with the intent of getting further than you were before. A lot of businesses should know one of the most important mantras in entrepreneurship: you have to spend money to get money.

For other people, these things can fall on deaf ears. You will see many small businesses fail because they don’t think they should spend too much money on any kind of improvement. In their place, other businesses will invest and push them out of the market. Spending money might seem pretty simple, but that’s not the whole story. You have to spend that money wisely. On the opposite side of the spectrum, you have entrepreneurs that spend thousands of dollars on investments that will never give bear fruit.

3. Choosing the right channels

Picking the right place to invest your money is the most important part of the business and it works the same way when dealing with marketing ROI. Depending on what your company does, it can be any number of things. A cattle farm might not need to invest a lot of money into billboards, while a luxurious hotel in the center of a city will make good use of it. There are some relatively safe choices that can be made for businesses. Not every company has large stacks of money lying around, but they still need to invest to make growth. In fact, this is how a large majority of companies start out. Marketing should be one of those investments as well. Choosing the right channel is important, and knowing your audience is the first step in that process.

4. Learn from your competitors.

They say that experience is the greatest teacher. Unfortunately, there are only so many failed investments that a company can make before they go under. It’s simply not worth making bad decisions in order to learn from them. The good news is that you don’t have to do it yourself. You probably won’t find a business that is so niche that there are no competitors in their market. This means that they can look at the moves their contemporaries are making and calculate if they can make the same success.

It’s not as difficult as it may seem at first glance. If you look at the website of one of your competitors, you will notice the layout and which features they have. Any time you notice an update to their software, you can check on their social media and see if it has had any effect. You already know the price of a good website upgrade, but you should see if others can make money off of it before you try it yourself. This is something you can do to every aspect of your business. Everything from SEO to e-mail marketing campaigns can be analyzed from afar. As long as you don’t wait too long, you can get in on the good ideas before your competitors start taking customers away.

Conclusion

Roughly calculating the ROI of an investment is one of the most important aspects of a business. Businesses don’t look at it as a way to spend money, but rather as a way to make money. With the right kind of knowledge, anyone can calculate the returns of a smart business decision and marketing ROI. With this in mind, make sure you and your company are always three steps ahead of the market when you make your decisions.